Zimbabwe’s ZiG faces trust test as government seeks to cut dollar reliance

HARARE, Zimbabwe — Zimbabwe is trying to increase the use of its Zimbabwe Gold currency, known as the ZiG, as part of a longer-term effort to reduce reliance on the US dollar. The plan faces resistance from consumers and businesses still wary of the country’s history of currency instability.

The ZiG was introduced in April 2024. The Reserve Bank of Zimbabwe says it is supported by foreign currency and precious metal reserves, including gold. The central bank has also reported that annual ZiG inflation stood at 3.7 percent last month.

However, officials have not set out a specific timetable for reducing dollar use. The RBZ has moved away from an earlier objective of adopting a single currency by 2030 and now favours a gradual, market-led shift towards broader use of the ZiG.

A cautious transition

The government and central bank are seeking to increase the currency’s role in domestic transactions, including tax payments and public-sector transactions. On April 7, the RBZ introduced an upgraded series of ZiG banknotes with revised designs and security features.

Those measures are intended to support the currency’s use, but demand remains limited. Economist Cornelius Dube said the amount of ZiG in circulation must reflect demand for it, which he described as “currently very subdued”.

“History shows that it is possible to de-dollarise, though it’s not easy. It takes time,” Dube said.

He argued that policy should focus on incentives rather than forcing people to exchange one currency for another. “Policy should not try to force a conversion but should create the necessary incentives which will eventually see both businesses and consumers being indifferent to holding ZiG or US dollars,” he said.

Memories of earlier losses

Zimbabwe abandoned its local currency in 2009 after a period of hyperinflation and adopted a multicurrency system dominated by the US dollar. A domestic currency returned in 2018, but repeated instability has made it difficult to rebuild confidence.

Charles Mbwandarikwa, a primary school teacher, said he lost his pension savings during the 2009 currency crisis. He now receives about one-third of his salary in ZiG and exchanges it quickly instead of keeping it.

Mbwandarikwa also reported that the equivalent value of his salary fell from $540 to $40 by the end of 2018, reinforcing his concerns about holding a local currency.

For businesses, the challenge is also linked to customer behaviour. Clothing retailer Sesedzai Chigumira said she has completed only a handful of sales in ZiG. Businesses may prefer dollars because customers prefer to pay in dollars, while consumers may avoid holding ZiG because they fear its value could decline.

Confidence remains unresolved

The RBZ’s claim that the ZiG is backed by reserves has not removed concerns over its future purchasing power. Using the currency for payments is not necessarily the same as trusting it as a store of value.

Zimbabwe’s authorities are therefore pursuing a gradual transition rather than an immediate replacement of the US dollar. Whether the approach can persuade households and companies to hold and accept more ZiG remains uncertain.